Nothing to see here, the Emanuel administration declares at a hastily arranged City Hall hearing prompted by a BGA/Crain's investigative report of a shell game that shifted blight-fighting tax funds to Navy Pier.

Chicago Planning and Development Commissioner David Reifman today defended the diversion of $55 million in city blight-fighting funds to renovate Navy Pier after being grilled by Chicago aldermen who said key details of the plan were hidden when they approved it in 2014.

In a hastily announced City Hall hearing, aldermen demanded answers from Mayor Rahm Emanuel’s administration and top officials of the agency that runs McCormick Place about a financial shell game involving the Navy Pier money disclosed recently by the Better Government Association and Crain's Chicago Business.

"Never in any of those hearings was it mentioned that money would be sent over to [Navy Pier]," Ald. Scott Waguespack (32nd) said. "This was not discussed."

The report pointed to internal emails and public records that showed the city and the convention agency hatched a plan to filter the money through a 1,200-room hotel project at McCormick Place, using its near South Side location as a rationale for spending funds earmarked for economically depressed neighborhoods.

Within weeks, the money was rerouted dollar for dollar to Navy Pier Inc., a non-profit that runs the tourist hotspot that is far removed from urban blight and ineligible for the so-called tax increment financing dollars.

The maneuver underscores a lightning rod issue with critics of Emanuel, who have long complained he has used the TIF program to steer scarce property tax dollars towards vanity projects and away from schools, parks and other development in less affluent parts of town.

In one email obtained through the Illinois Freedom of Information Act, the then chief financial officer of the convention authority described it as a “middleman” in the arrangement and declared that the agency was not in line to actually keep any of the TIF money.

That bookkeeping maneuver showed that the agency, formally known as the Metropolitan Pier & Exposition Authority, possessed the financial resources to have paid for its share of hotel construction costs without any assistance from the TIF program.

Reifman, who was not part of the planning department when the money transfers occurred, nonetheless argued that the anti-blight money was properly spent on the hotel. He said the cash transfers to Navy Pier occurred only after the city paid its promised share of hotel construction costs to MPEA.

At the hearings, Reifman and MPEA officials also argued that plans for the complicated money shifting was addressed from the outset when Emanuel in 2013 outlined a vision for a $1.1 billion package of upgrades at both McCormick Place and Navy Pier.

“There was a lot of discussion of how the funds would be applied over the entirety of that budget since all of the projects were known at the time,” Reifman said.

That elicited a swift condemnation from Ald. John Arena (45th). “That is not true,” Arena interrupted. “We asked what the money was going to be spent for and there was never a discussion that it’s going to go for X, Y and Z at Navy Pier. It was not.”

Arena said he was unsatisfied with Reifman's answers and said the commissioner's explanations that all the funding was "mixed up in a soup" was inadequate.

Reifman also said that much of the email banter that was detailed in the BGA/Crain's story was a discussion about "cash-flow" issues.

At the hearings, city and MPEA officials did not clearly address the question of whether any TIF funding was needed to build the hotel. Arena asked the administration to provide documentation to prove that the hotel could not have been built without the injection of blight fighting cash.

Emanuel, at an unrelated event, did not answer when asked by reporters why the plan to use TIF money to free up funding for Navy Pier was not publicly disclosed years ago. Instead, the mayor confined his comments to new jobs he said the pier and hotel projects created.

“I was upfront that we were going to not only improve McCormick Place, we were going to create jobs and economic opportunity at Navy Pier,” he said after a ribbon-cutting ceremony for a North Side road improvement project. “I said it when I announced it in 2013 that we were going to create thousands of construction jobs and add jobs to tourism and the hospitality industry and the convention business, and that’s exactly what’s happened.”

The impromptu hearing at City Hall was held at the behest of Ald. Pat Dowell (3rd), whose ward includes the McCormick Place development.

Following publication of BGA/Crain’s story, Dowell complained that she had been “blindsided” by the disclosures and called for hearings into the financial maneuvering. The BGA and Crain's interviewed her briefly in May and explained the findings of the report to her at that time.

She then declined through a spokesman a request from the two news organizations for a more in-depth, follow-up interview.

Dowell moved for the quick hearing Monday after initially declaring she would ask the City Council later this week to schedule a more exhaustive hearing. Instead, however, she settled for something less and declared that she felt "better" after hearing the administration's explanations.

However, she said the Monday hearing was just the “start” of her due diligence on the issue and said she’d call for an in-depth hearing in the future if she felt she needed to. She also did not completely spare the administration and MPEA from criticism.

“The lesson here is there needs to be transparency on how these deals go down," Dowell said.

Author(s)

John Chase is the director of investigations at the Better Government Association. He was named to the post after 18 years as a general assignment, political and investigative reporter for the Chicago Tribune.